ENG-2016 — Page 94

2

3

4

Financial and Monetary Affairs

International Banking and Payment Centre

Hong Kong was the world's sixth and Asia's second largest banking centre in terms of external positions2 in the Bank for International Settlements Quarterly Review for end-2016.

International financial institutions maintain a strong presence in Hong Kong. Of the world's top 100 banks, 75 operate in the city. At the year end, 149 of the 156 licensed banks in Hong Kong were beneficially owned by parties outside Hong Kong.

Hong Kong has a robust real-time gross settlement (RTGS) interbank payment system. All banks in the city maintain settlement accounts with the Hong Kong Monetary Authority (HKMA) through the Hong Kong dollar (HKD) RTGS system3. The US dollar (USD), euro and RMB RTGS systems enable transactions in these currencies to be settled in real time. All four RTGS systems are linked to enable forex transactions to be settled on a payment-versus-payment basis.

The HKMA's Central Moneymarkets Unit (CMU) provides clearing, settlement and custodian services for Exchange Fund Bills and Notes (EFBNs), government bonds and other HKD or foreign currency public/private debt securities. It is linked to a number of international and regional central securities depositories to enable overseas investors to hold and settle securities lodged with the CMU, and local investors to hold and settle securities lodged with overseas systems. Through its seamless interface with the RTGS systems, the CMU system is able to settle securities transactions on a delivery-versus-payment basis. Besides debt securities, the CMU provides a standardised and automated platform for the investment fund industry to streamline the handling of investment fund order instructions.

Chart 6

HK$ Billion

20,000

External Positions of Als

18,779

15,000

17,510

16,726

15,283

13,246

10,000

5,000

0

2012

2013

2014

2015

2016

Year

Sum of liabilities to banks and non-bank customers outside Hong Kong and claims on banks and non-bank customers outside Hong Kong, such as equities, securities and capital instruments.

Banks may obtain intra-day and overnight liquidity through repurchase agreements with the HKMA using Exchange Fund Bills and Notes and government bonds as collateral.

60